10 Worst Materials Stocks in the S&P 500

NEW YORK (TheStreet) -- The materials sector has underperformed the market so far this year, with S&P 500 materials stocks falling 0.58% through the first half. Meanwhile, the S&P 500 returned growth, albeit meager at 0.2%.

That said, several materials companies in the index underperformed both their cohort and the S&P 500 as a whole. Below are the 10 worst.

Sometimes the bargain bin is the best place to find good deals on undervalued stocks. With that in mind, TheStreet paired the 10 best performing materials sector stocks with TheStreet Ratings to determine whether they really are poor investments going forward.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Check out which stocks were among the worst materials performers in the S&P 500 for the quarter. And when you're done with that be sure to find out which materials companies had the best performance in the S&P 500 for the first quarter.

FMC Corporation, a diversified chemical company, provides solutions, applications, and products for the agricultural, consumer, and industrial markets in North America, Europe, the Middle East, Africa, Latin America, and the Asia Pacific.

"We rate FMC CORP (FMC) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.2%. Since the same quarter one year prior, revenues fell by 12.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

Even though the current debt-to-equity ratio is 1.43, it is still below the industry average, suggesting that this level of debt is acceptable within the Chemicals industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.81 is weak.

Net operating cash flow has significantly decreased to -$297.20 million or 207.02% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

The share price of FMC CORP has not done very well: it is down 24.66% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

Airgas, Inc., together with its subsidiaries, supplies industrial, medical, and specialty gases; and welding equipment and related products. It operates through two segments, Distribution and All Other Operations.

"We rate AIRGAS INC (ARG) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The revenue growth came in higher than the industry average of 13.2%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.

Net operating cash flow has slightly increased to $203.35 million or 6.46% when compared to the same quarter last year. Despite an increase in cash flow of 6.46%, AIRGAS INC is still growing at a significantly lower rate than the industry average of 72.17%.

The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Chemicals industry and the overall market on the basis of return on equity, AIRGAS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

In its most recent trading session, ARG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.

Nucor Corporation manufactures and sells steel and steel products in the United States and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials.

"We rate NUCOR CORP (NUE) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

Net operating cash flow has significantly increased by 277.77% to $563.69 million when compared to the same quarter last year. In addition, NUCOR CORP has also vastly surpassed the industry average cash flow growth rate of 20.55%.

Despite currently having a low debt-to-equity ratio of 0.58, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that NUE's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.95 is high and demonstrates strong liquidity.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, NUCOR CORP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

Regardless of the drop in revenue, the company managed to outperform against the industry average of 17.4%. Since the same quarter one year prior, revenues fell by 13.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

NUCOR CORP's earnings per share declined by 40.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, NUCOR CORP increased its bottom line by earning $2.22 versus $1.52 in the prior year. For the next year, the market is expecting a contraction of 22.3% in earnings ($1.73 versus $2.22).

Monsanto Company, together with its subsidiaries, provides agricultural products for farmers worldwide. It operates in two segments, Seeds and Genomics, and Agricultural Productivity.

"We rate MONSANTO CO (MON) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The revenue growth came in higher than the industry average of 13.2%. Since the same quarter one year prior, revenues slightly increased by 7.7%. Growth in the company's revenue appears to have helped boost the earnings per share.

MONSANTO CO has improved earnings per share by 47.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MONSANTO CO increased its bottom line by earning $5.13 versus $4.56 in the prior year. This year, the market expects an improvement in earnings ($5.75 versus $5.13).

The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 33.0% when compared to the same quarter one year prior, rising from $858.00 million to $1,141.00 million.

The gross profit margin for MONSANTO CO is rather high; currently it is at 63.59%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 24.91% significantly outperformed against the industry average.

The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to other companies in the Chemicals industry and the overall market on the basis of return on equity, MONSANTO CO has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.

International Paper Company operates as a paper and packaging company in North America, Europe, Latin America, Russia, Asia, Africa, and the Middle East. The company operates through three segments: Industrial Packaging, Printing Papers, and Consumer Packaging.

"We rate INTL PAPER CO (IP) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations, growth in earnings per share and increase in net income. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Paper & Forest Products industry and the overall market, INTL PAPER CO's return on equity exceeds that of both the industry average and the S&P 500.

Net operating cash flow has increased to $638.00 million or 35.45% when compared to the same quarter last year. Despite an increase in cash flow, INTL PAPER CO's average is still marginally south of the industry average growth rate of 41.10%.

INTL PAPER CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, INTL PAPER CO reported lower earnings of $1.33 versus $3.81 in the prior year. This year, the market expects an improvement in earnings ($3.92 versus $1.33).

IP, with its decline in revenue, slightly underperformed the industry average of 0.9%. Since the same quarter one year prior, revenues slightly dropped by 3.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Paper & Forest Products industry average, but is greater than that of the S&P 500. The net income increased by 429.5% when compared to the same quarter one year prior, rising from -$95.00 million to $313.00 million.

Allegheny Technologies Incorporated produces and sells specialty materials and components worldwide. The company operates through two segments, High Performance Materials and Components; and Flat-Rolled Products.

"We rate ALLEGHENY TECHNOLOGIES INC (ATI) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and increase in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The revenue growth greatly exceeded the industry average of 17.4%. Since the same quarter one year prior, revenues rose by 14.0%. Growth in the company's revenue appears to have helped boost the earnings per share.

ALLEGHENY TECHNOLOGIES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ALLEGHENY TECHNOLOGIES INC continued to lose money by earning -$0.02 versus -$0.93 in the prior year. This year, the market expects an improvement in earnings ($0.98 versus -$0.02).

Despite currently having a low debt-to-equity ratio of 0.59, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.99 is weak.

The gross profit margin for ALLEGHENY TECHNOLOGIES INC is currently extremely low, coming in at 13.78%. Regardless of ATI's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 0.88% trails the industry average.

ATI's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.81%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

"We rate DU PONT (E I) DE NEMOURS (DD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.06, which illustrates the ability to avoid short-term cash problems.

Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Chemicals industry and the overall market on the basis of return on equity, DU PONT (E I) DE NEMOURS has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.

DU PONT (E I) DE NEMOURS's earnings per share declined by 26.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DU PONT (E I) DE NEMOURS increased its bottom line by earning $3.89 versus $3.04 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.89).

Net operating cash flow has increased to -$2,123.00 million or 12.30% when compared to the same quarter last year. Despite an increase in cash flow of 12.30%, DU PONT (E I) DE NEMOURS is still growing at a significantly lower rate than the industry average of 72.17%.

Owens-Illinois, Inc., through its subsidiaries, manufactures and sells glass container products to food and beverage manufacturers primarily in Europe, North America, South America, and the Asia Pacific.

"We rate OWENS-ILLINOIS INC (OI) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strongest point has been its expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

OWENS-ILLINOIS INC's earnings per share declined by 29.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, OWENS-ILLINOIS INC reported lower earnings of $0.59 versus $1.20 in the prior year. This year, the market expects an improvement in earnings ($2.18 versus $0.59).

OI, with its decline in revenue, underperformed when compared the industry average of 0.4%. Since the same quarter one year prior, revenues fell by 13.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

The gross profit margin for OWENS-ILLINOIS INC is currently lower than what is desirable, coming in at 25.55%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 4.99% is above that of the industry average.

Net operating cash flow has decreased to -$278.00 million or 36.94% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 31.17%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 29.03% compared to the year-earlier quarter. Although its share price is down sharply from a year ago and the fact that OI is still more expensive than most of the other companies in its industry based on its current price-to-earnings ratio, we believe that other strengths that the company offers support our buy rating.

Freeport-McMoRan Inc., a natural resource company, engages in the acquisition of mineral assets, and oil and natural gas resources. It primarily explores for copper, gold, molybdenum, cobalt, silver, and other metals, as well as oil and gas.

"We rate FREEPORT-MCMORAN INC (FCX) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 585.1% when compared to the same quarter one year ago, falling from $510.00 million to -$2,474.00 million.

The debt-to-equity ratio of 1.29 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, FCX has a quick ratio of 0.67, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, FREEPORT-MCMORAN INC's return on equity significantly trails that of both the industry average and the S&P 500.

Net operating cash flow has decreased to $717.00 million or 40.29% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 44.82%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 585.71% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

"We rate ALCOA INC (AA) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

The revenue growth came in higher than the industry average of 17.4%. Since the same quarter one year prior, revenues slightly increased by 6.7%. Growth in the company's revenue appears to have helped boost the earnings per share.

ALCOA INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, ALCOA INC turned its bottom line around by earning $0.19 versus -$2.15 in the prior year. This year, the market expects an improvement in earnings ($0.94 versus $0.19).

The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market on the basis of return on equity, ALCOA INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

AA has underperformed the S&P 500 Index, declining 20.49% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.

AA's debt-to-equity ratio of 0.76 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that AA's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.67 is low and demonstrates weak liquidity.

Palo Alto Networks' crucial earnings day events on Wednesday could determine share price direction in the immediate term. Ahead of the print, the stock still looks like a solid GARP play to be held over longer periods of time.